Stung by years of asset disposal failure, financially distressed construction companies are now placing their hope on finding themselves a foreign owner, which the local industry considers to be a double-edged sword.

Byucksan Engineering & Construction, Korea’s 35th-largest builder, signed a long-anticipated merger and acquisition deal with Qatar’s Akid Consulting earlier this week, according to officials.

Based on the deal, the Qatari firm is to acquire 60 billion won ($57 million) worth of the builder’s stocks through paid-in capital increase, said the Financial Supervisory Service on Thursday.

Since kicking off a branch office in Seoul last month, Akid has been aggressive in taking over Byucksan E&C, which has a number of ongoing construction projects in the Middle East region.

The company also pledged to win part of a $150 billion deal to build new infrastructure in Qatar and to widen its share in the $1 trillion postwar reconstruction deal in Iraq by creating synergy with the Korean builder, officials said.

Upon the acquisition, Byucksan E&C’s stocks soared by 66 percent compared to the previous week, reflecting hope that the affluent new owner may revive the long-sluggish business.

Concerns, however, were also raised on the fact that massive Middle East capital can intervene in the domestic construction industry.

“It may be possible that these foreign companies may be after a sales margin, by purchasing these construction companies at their lowest point,” said an official of the Contractors Association of Korea.

Also, Byucksan E&C is more specialized in construction than civil engineering projects so it is doubtful whether the M&A will create the boosting effect as claimed by Akid Consulting, he added.

“The Middle East investor is not likely to heavily invest in Byucksan E&C in the near future as the latter has shown poor performance in the market over recent years,” said an official of the International Contractors Association of Korea.

An extreme example is Lone Star’s takeover of Kukdong Engineering & Construction in 2003, which created general dissent against foreign capital here.

The U.S.-based company sold out most of the builder’s tangible assets, made over 200 billion won in profit, and then sold the company to a new owner.

Despite such concerns, several builders, including the nation’s 16th-largest Ssangyong Engineering & Construction, are still stretching out to potential foreign acceptors in an aim to shake off their accumulated debts.

By Bae Hyun-jung (tellme@heraldcorp.com)